Use 'There is..." when the noun that follows is singular, and "There are..." when it is plural:
"There is/there's a pen and two pencils on the desk."
"There are two pencils and a pen on the desk."
So - "There is paper and water on the floor."
We often use contractions in colloquial speech, such as 'there's' for 'there is'. This makes it quick and easy to say things like:
"Hey! There's a car in my parking spot."
Trouble is, there's no contraction for 'there are' : there're ????
So, even when the following noun is plural, colloquially we tend to say:
[COLOR="Purple"]"There's a few people I'd like you to meet."[/COLOR
re The test scorer told me that "There" is the subject and therefore takes the singular form of the verb.
Take heart: if your quote is accurate, the test scorer may know the correct answers to the test, but obviously not the grammatical reasons why.